The government's decision of not coming up with a separate electric vehicle policy opens the door to another incentive system that could piggyback on fuel efficiency standards. Such a system is already prevalent in China and Europe.

Experts believe until government promotes electrification, there will be a gap in the auto space. Original equipment manufacturers (OEMs) are not going to be able to absorb the entire cost of emission and efficiency standards, therefore, diesel will get more expensive and consumers will turn to gasoline.

"Just waiting for diesel to get more expensive is not enough. The government not only needs to invest in promoting electrification and charge points, but make sure that India has a more stable power supply," Andrew Fulbrook, director of global powertrain forecasting at consultancy firm IHS Automotive told Business Standard. This, he says, would mean that the government is getting consumers ready for a bigger challenge than just incentivising OEMs.

"Plug-in hybrid electric vehicle will be predominantly gasoline because of the successful, effective and swift demonisation of diesel," Fulbrook said.

In China, the United States and Europe, manufacturers have a target for fuel economy or CO2 emission for their fleet. "India may form a credit system very similar to Europe. We do have CO2 regulation but nothing is being done to engineer the outcome of manufacture’s ability. Generally, some engineering needs to be done to produce the change."

According to Fulbrook, India is still 10 years behind so there is a headroom to refine gasoline proposition. "OEMs are not going to bring high specification gasoline engine here if they don’t need to. Europe and Japan are extracting as much as they can in terms of fuel economy and emission reduction from gasoline engines. Not much is left to extract from them for gasoline technology."

After moving to BS-VI emission norms, diesel will become less attractive and manufacturers will have to eventually turn away from it, though they will be able to meet their fuel emission targets, he says.

"Gasoline comes to fore again.

Hybrids will be a low volume. Even electric vehicles will be expensive because you are asking the consumers to use a low-range vehicle, change their behaviour in terms of charging the vehicle instead of filling it up with fuel," says Fulbrook.

Besides, there are not a large number of products to choose from. "There is demonisation of diesel and confusion so what we will see is a gap similar to what we have seen in the European market. Consumers are being pushed out of diesel and they are shifting towards gasoline ones and not towards plug-in hybrid or electric vehicles. What we are seeing is CO2 numbers not getting down but becoming flatter and flatter. We are left with a chunk of time in the middle where we have not lined up the variables. The government has not engineered the situation well. I fear that will happen in India," says Fulbrook.

In 2023, there will be pan-implementation of BS-VI norms in India. Potentially, India could also move to real driving emission (RDE) and Worldwide Harmonised Light Vehicle Test Procedure (WLTP) laboratory test that is used to measure fuel consumption and CO2 emissions from passenger cars. OEM is not going to be able to absorb that and, therefore, diesel will become more expensive and consumers will turn to gasoline. According to Fulbrook, the tipping point where consumers look away from diesel and look at hybrid and electric will probably be in mid-2023.

Car manufacturers work on a product cycle measured in years and therefore, if they are looking at 2023, they got to start strategising their portfolios and powertrain options, getting their supply base and getting contracts drawn up if there is uncertainty, Fulbrook said.